The Federal Reserve has been buying $85 billion in bonds every month to hopefully lower long-term interest rates. The Fed released a statement saying that it will continue the program, and that while the economy has been improving, the central bank wants “more evidence that progress will be sustained before adjusting the pace of its purchases.” There is no set end date for the program, but Fed Chairman Ben Bernanke said at one point that he thought it would taper off in late 2013 and end by mid-2014.
In response to investors’ assumption that the program would start slowing down this month, Bernanke said: “We could begin later this year. But even if we do that, the subsequent steps will be dependent on continued progress in the economy. So we are tied to the data. We don’t have a fixed calendar schedule.”
As far as short-term interest rates, Bernanke is confident that they won’t go up any time soon. The Fed has a goal of not raising the short-term interest rates until the unemployment rate decreases to about 6.5%. Predictions have made that the unemployment goal could be met in the next year, and by the end of this year, it should be around 7.2%.
